In the Media: Scandals affecting community associations in 2013

Posted by Andrea Drennen, CMCA on January 16, 2014

Scandals 2013

Last year, one of the most popular articles on the CAM blog was one that almost didn’t make it into the blog at all because we were worried it would be too salacious.

Now, you and I both know that it’s the word SCANDAL that made you click on this link – because we all like a little juicy gossip once in a while! 

But the truth is, there is a lot we can learn from scandals, and that is why we are turning this into an annual series that looks at the scandals that have rocked our industry in the last year and tries to discover how we can learn and grow from them to be better managers, better board members, and better people in general.

  1. As community associations forget their history, discrimination rears its head... again

    When community associations first hit the scenes in America, many exclusive communities used the opportunity to add racial discrimination provisions into the community charters. While these provisions were invalidated by the Fair Housing Act, it continues to be an embarrassing chapter in the history the industry. Sadly, it seems that some communities need to learn this lesson once again.

    In 2013, one community’s board in particular was faced with a lawsuit threat based on the charges of discrimination against a transgendered member. A strongly worded legal note from the victim’s attorney made them change their tune rather quickly.

    On the other side of the coin, we have a condo association that tried to do the right thing by informing community members that a registered sex offender owned 2 units in the building. Unfortunately, the association got it wrong, and the owner sued the association - and won, to the tune of $890,000.

    Another community now owes a resident family $65,000 after discriminating against the families special 
    vehicle requirements for their disabled son. Have a heart, would ya?

  2. Media Lambasts "No Playing" bans by Community Associations

    When the board of directors of a community association adds a controversial rule like preventing children from playing in the street, they usually have a well-meaning reason. After all, it's dangerous to have children playing in a dangerous throughfare. However, sometimes, a board's well-meant intentions can go too far, as was the case for these communities: 

    When this association banned all play including 'acting boisterously on the association property', playground advocates took up the banner, questioning the legality of such a reuling, and encouraging a public writing campaign. Another HOA in Florida attempted to pass a 'No playing in the street' ban, only to have some pontiffs go so far as to blame them for child obesity in America.

    One California HOA is now being sued by a resident couple based on alleged discrimination against their children, including a ban on Trick or Treating, and a 'No Playing Outside' ruling. Reading the comments reveals that the provisions were in the CC&Rs of the community before the family moved in. That only makes the scandal more juicy, as people rush to take sides, especially when the question of selective enforcement comes in to play.

  3. Despite increased regulation and new state laws, people continue to find new ways to embezzle from Community Associations

    Unfortunately, no industry is completely safe from it, but embezzlement particularly hurts when the money is stolen from condos and HOAs because the other members of the association have to bear the brunt of the loss. Among hundreds of embezzlement charges brought forth this year, the unusual ways that people embezzle, and the odd things they do (or plan to do)  with the money might come as more of a surprise than the fact that they committed the crimes in the first place.

    One embezzler created fraudulent work orders, then cut checks to herself. An 86 year old man forged the treasurer's name on checks... the catch? She was dead. As for reasons, using the money for gambling is a common thread, but my favorite? this lady who embezzled funds from her landscaping company employer so she could use the money to pay restitution for a previous embezzling conviction against her HOA.

  4. Internationally, fraud becomes an issue as community associations concept spreads

    Growing markets of community associations led to increased reports of embezlement and fraud across the globe. 
    Toronto saw their fair share of vendor fraud, bid rigging, fraud and embezzlement. Down under, a couple had their own Bonnie and Clyde moment when they absconded with nearly 1.2 million dollars from their management company. Even farther afield, a former president of Taiwan pled guilty to a money laundering case involving a condo in New York. Even South Africa saw cases of embezzlement!

    Perhaps one of the reasons that fraud is so easily committed is that banks aren't doing their part to verify the legitimacy of checks being cashed. At least one credit union in British Columbia, Canada has admitted that they do not compare the account checks were deposited into versus the name to which the checks are made out, allowing one fraudster to deposit checks made out to other parties into his own account over a period of 10 years! The bank representative attests that "Every single financial institution uses the same system."

  5. Sinkholes Devastate Communities as Mother Nature Fights Back Against Sprawl

    Imagine waking up in the middle of the night to a deafening noise and running to a family member's bedroom only to find that everything: their bed, their dresser, even your loved one have disappeared into the ground, never to be seen again. That is the horror that one Florida family experienced in 2013, and that was just the beginning.

    2 homes, a boat and a swimming pool were sucked into one in a single night. One California community was destroyed; a resort complex in Walt Disney World was eaten up; and an entire town (over 25 miles) in Louisiana was completely swallowed. (The first 40 seconds of the video showing the LA sinkhole will make your hairs stand on end!) 

    The worst part? Insurance companies (especially outside of Florida where sinkholes are more common) seem paralyzed to know how to deal with this problem, leaving homeowners, and their HOAs, in the lurch. 

Aside from making for a shocking gossip item, a scandal can bring into light an instance of wrong-doing or injustice, but it can also damage reputations of both the guilty and the innocent. Sometimes, the best thing we can do to avoid the negative attention is to simply be open and transparent with our money, polite, and fair to others, and hire a good lawyer…just in case.


Get a free demo of TOPS all-in-one community management software